BOSTON — DraftKings, the well-known gambling company, has agreed to a $10 million settlement in a class-action lawsuit regarding its sales of non-fungible tokens (NFTs) through a marketplace that is no longer in operation. The lawsuit was spearheaded by lead plaintiff Justin Dufoe and represented others who had purchased NFTs from DraftKings.
The preliminary approval for the settlement was granted by Judge Denise Casper of the Boston federal court on February 28, following a motion filed by the plaintiff’s group a few days prior. The settlement, which awaits a final approval, proposes a split of the $10 million fund among affected class members.
At the heart of the lawsuit, filed in March 2023, is the allegation that the NFTs sold by DraftKings were actually “investment contracts” under U.S. law and should have been registered as securities. The legal action named not only DraftKings but also its co-founders Jason Robins, Matt Kalish, and finance chief turned chief transformation officer, Jason Park.
The plaintiff, Dufoe, claimed to have suffered a loss of $14,000 from selling these NFTs on DraftKings’ DK Marketplace, compounded by a depreciation in the value of NFTs he still held. The class-action pointed out that following the closure of its marketplace in July 2023, DraftKings left NFT owners with assets that had significantly reduced in value.
The closure of the NFT marketplace by DraftKings was attributed to “recent legal developments,” coming shortly after judicial opinions suggested that the NFTs might indeed qualify as securities under the law. This preliminary judicial finding was a key factor leading to the settlement discussions which culminated in a mediator-led, all-day negotiation session.
In seeking the settlement, the class action’s filing highlighted the aim to avoid protracted and expensive litigation that could strain resources and extend over several years. The plaintiff group has argued that continuing the legal battle could be more detrimental than beneficial to the affected parties, emphasising the settlement as an “outstanding result.”
Financially, realistic damages calculated by the group ranged between $18 million and $58 million. The agreed settlement represents roughly 26% of the midpoint of these estimated damages, which the class described as “an excellent recovery under the circumstances.”
This is not DraftKings’ first legal rodeo concerning NFTs for the year. Earlier, in January, DraftKings settled a lawsuit with the National Football League Players Association, which had accused it of failing to secure proper rights for using NFL players’ likenesses in its NFTs. The details of that settlement were not publicly disclosed, but legal proceedings were paused until March 28 to finalise the agreement.
This legal development underscores the ongoing debates and regulatory challenges facing the NFT market, particularly when intertwined with traditional financial instruments and securities law.
Disclaimer: This article was automatically written by Open AI and may contain inaccuracies. For corrections, removals, or retractions, please contact [email protected].